Small and medium businesses are the backbone of the Indian demand and supply market. To ensure these businesses flourish even more without facing any challenges, the Government of India introduced a composition scheme under GST. This composition scheme has almost similar characteristics to that of the composition scheme functional in earlier VAT regimes.
Want to know more about this composition scheme under GST? Stay tuned!
The Composition Scheme under GST allows tax payment at a concessional rate based on turnover. This scheme enables small businesses to avoid rigorous GST formalities and pay tax at a fixed rate of turnover. Remember, this composite scheme of GST is not a compulsory scheme.
This scheme focuses on small businesses, i.e. taxpayers who can pay tax at concessional rates.
Note that there are certain GST composition scheme rules which small businesses have to obey in order to get the benefits offered under this scheme.
GST Composition Scheme is available to those small taxpayers whose turnover is below ₹ 1.5 crores.
The Composition Scheme under GST limit is set at ₹75 lakh for Eastern State and Himachal Pradesh.
According to the CGST (Amendment Act) 2018, a composition dealer can continue to supply services for up to 10% of turnover or ₹ 5 lakh, whichever is higher; this amendment came into effect from 1st Feb 2019. In the 32nd meeting of the GST Council, the committee proposed to increase the limit, especially for service providers, on 10th Jan 2019. Here, the calculation of turnover will depend on all businesses having registration with the same PAN.
Note: The CBIC has urged to increase the limit under GST composition scheme from ₹ 1 crore to ₹ 1.5 crores.
Besides, individuals who cannot avail Composition scheme under GST are as follows:
Individuals need to fulfil the following conditions to avail Composition scheme under GST:
After knowing all these criteria, individuals can now apply for this scheme without any hassle.
Here is a step-by-step guide to applying for this Composition Scheme under GST.
Individuals must file an intimation via Form GST REG-01.
Individuals must furnish an intimation in Form GST CMP – 02 and state their wish to utilise this option. Here, they need to provide a statement via Form GST ITC-3 with details of ITC regarding stock, semi-finished or finished goods - within 90 days (as per the new rule) of the beginning of the particular financial year.
Note: Individuals must file a GST TRAN-1 before submitting Form GST ITC-03
To opt for this GST Composition Scheme, bill of supply is mandatory. Since composition vendors are not authorised to collect tax, they cannot file for ITC on the supplied products on their end. Hence, they need to have a bill of supply instead of a tax invoice.
Following is a list of benefits available under the Composition Scheme GST.
The new tax structure lowers the liability of taxpayers.
Lower tax liability at fixed GST Composition rate brings more liquidity to a small business. If businesses have more liquidity, they can maintain cash flow efficiently and ensure smooth business operation.
One of the prime benefits of the Composition Scheme under GST is the reduced compliance requirement. Here, individuals need not maintain record books, can file lesser returns and avoid furnishing tax invoices.
The above-mentioned piece talks about Composition Scheme under GST. Read these details carefully, especially the sections of eligibility and the application process and do the same without any hassle.
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Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
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